Starwood Property Trust posts $389.7M loss on credit provision

Starwood Property Trust posted a $389.7 million net loss in the third quarter, versus $72.6 million of net income a year earlier. The result included a $336.6 million credit loss provision and a $121.6 million net fair-value loss on mortgage loans.

Distributable earnings fell to $116.8 million, from $151.5 million in the second quarter and $148.6 million a year earlier, according to Commercial Observer. The shares fell 3% after the results to $12.36. They are down 32% year to date and have lost 52% of their value over five years.

For advisors whose clients hold Starwood commercial real estate debt, the $389.7 million quarterly loss is concentrated in writedowns on existing mortgage positions. The provision and the mortgage charge account for the swing from $6.6 million of positive net income in the second quarter.

Starwood Chairman and CEO Barry Sternlicht called the stock pressure “turbulence” and told analysts on Friday’s call that commercial real estate fundamentals are “getting better and better.”

President Jeffrey DiModica said Starwood committed more than $250 million to resolutions in the quarter and is on target to resolve $800 million of deals by year-end, reducing exposure to loans originated before 2022. “The objective is to maximize recovery and recycle capital into investments that contribute to future earnings,” he said. The firm is still lending. In October it provided $237.7 million to King Street Properties to refinance a life sciences campus in Morrisville, N.C., as Private Wealth Daily previously reported.

Starwood invested $3.2 billion across its platform in the quarter, including $2.4 billion of commercial lending, the highest quarterly commercial lending total in four years. Year-to-date investments reached $8.2 billion. It also repaid $500 million of corporate debt six months before maturity and reported $1.1 billion of liquidity.